How do you manage money?

Everyday you make choices about how, where and when you will spend your money. These choices can have a huge affect on your financial life. Do you spend a lot of money on credit card debt each month? Do you save money regularly? Do you treat yourself by buying things after a rough week at work?
To get an idea of how you relate to money, take our Money Quiz (opens in a new browser window). Choose the answer which most applies to you.
Where does your money go?
If you don't keep track of your expenses, you don't know how you spend your money. When you know where your money goes, you feel more in control. Take time to think about your spending. Ask yourself:

• Do I have a good idea of how much I spend each week or month?
  
• Do I take care of the essentials first (such as food, utilities, rent and medical insurance) before spending money on other things?
  
• Do I have a huge balance on my credit card(s)?
  
• Am I a savvy shopper?
  
• Do I save money regularly?
  
• Do I have three month's of living expenses saved?
  
• Do I have specific goals that I am planning for financially?

After assessing how you manage your money, you might want to change your spending and saving habits. Being able to better manage your money will help you prepare for the future.
Bad money management habits can sometimes be hard to break. To tackle an undesirable habit, consider:

• What do I get out of it?
  If you spend a lot of money but save little, what do you get out of it? You get to enjoy "stuff" whether it's one more pair of black shoes to add to the five pair you already have or a new big screen TV.

• What's the negative?
  If you go on a shopping spree and don't pay your electric bill, you gain temporary "stuff" but you may lose service that is important. If you don't save money, what could happen if an emergency arises? If you look at it this way, you may realize that you are not making a good choice.

• Think before your spend.
  Each time you spend money you are making a choice. Your choices should reflect your values and financial goals. Before spending ask yourself: "Do I need it?", "Can I afford it?", "What is this purchase really costing me?"

• Find a good habit.
  If you really want to get rid of a bad habit related to money management, replace it with a good habit. For example, instead of overspending on designer clothes, start setting aside money for a down payment on a house or other goal. You must really want to get rid of the bad habit, and you must practice and work at it to change.

 As you make efforts to improve your spending habits, these tips can be very handful to you. Remember to always keep these steps in mind.

1. Plan ahead.

Write down your goals and objectives. It's important to be realistic. Will you more likely be able to afford a $200,000 house or one that costs $100,000 or less? Review your goals and objectives regularly to see if you are on track.

2. Create a budget.

Create a plan on how you will spend and save money. Update it regularly and evaluate your goals. Think about your financial situation, where you need to be, and determine how you're going to get there.(You'll learn about creating a budget in the next lesson)

3. Keep good records.

It's difficult to get your finances under control if you don't understand the basics of good record keeping. Keeping track of your bills, checks and other financial transactions is important.

4. Stay insured.

Purchase insurance to avoid being hard hit by a financial loss due to accident or illness. It's is an important part of your financial plan. For more information about benefits, visit our Work Development Course, Lesson 10.

5. Stay focused.

You'll need patience and discipline to start your financial plan and to follow it through. Don't be tempted to overspend.

6. Save more.

It's important to save money regularly so you can use it in the future. Begin by faithfully saving a small amount. If you are able to save enough money, you will be able to put some into investments, use it in emergencies or use it to reach your goals.

7. Educate yourself.

No one can protect you from your own bad judgment. Get the information you need to avoid financial trouble and make thoughtful decisions that can improve your financial security.

8. Take time.

Set aside time each month to work on your money management. Pick a time that works for you such as early in the morning when everyone else is asleep or a quiet time during the evening. You will find that it's time well spent. Read on for more money management information.

 

Excerpts from http://www.gcflearnfree.org/moneybasics